The UK and India have signed a significant trade agreement that is expected to increase British exports to India by 60% by 2040 and benefit the UK economy by around £4.8 billion a year. The deal was finalised at a high-level meeting held at Chequers and follows an initial announcement in May.
Tariff cuts and market access for key sectors
Under the agreement, tariffs on more than 90% of UK exports to India will be reduced, with significant gains for industries such as cosmetics, food and drink, and clothing. Cuts will be phased in over ten years. High-demand UK exports like salmon, lamb, machinery, chocolates, and auto parts will benefit from reduced trade barriers, alongside substantial benefits for whisky and gin producers. Alcohol tariffs will drop from 150% to 75% immediately and 40% by year ten of the agreement.
On the Indian side, tariffs will be removed on about half of Indian exports to the UK, including products like textiles, footwear, and agricultural goods such as mangoes and grapes. Many previously carried relatively low tariffs, typically between 4% and 16%.
India has also agreed to reduce automobile import duties from over 100% to just 10%, though quotas still need to be confirmed to limit this.
Investment, skills and digital tax agreements
The agreement is part of a broader move to deepen economic ties between the two countries, the world’s fifth- and sixth-largest economies. It includes an estimated £6bn in new investment and export activity, although this figure includes previously announced major aircraft sales.
The UK did not concede on general visa access or post-study work rights. However, it did allow limited movement for skilled Indian professionals, including 1,800 short-term work visas for cultural and creative sector roles. Additionally, Indian workers on short-term company transfers will now be exempt from paying UK national insurance contributions for up to three years, an increase from the previous one-year rule. Employers will also benefit from this exemption.
This so-called double contributions convention aligns with the UK’s similar tax arrangements with over 50 other countries. It has been the subject of political criticism, but it is not expected to affect the cost of hiring practices in the UK.
Future trade ambitions and business reaction
This agreement marks a strategic shift in the UK’s approach to trade deals with large and fast-growing economies. It aims to reduce tariffs and establish a framework for long-term cooperation, skills exchange, and investment.
India is pursuing trade talks with other major global economies, including the US, EU, and ASEAN. The UK deal may serve as a template for future agreements.
Bilateral trade between the UK and India exceeded $55bn during the 2023/24 financial year. Around 1,000 Indian companies operate in the UK, employing nearly 100,000 people with a combined turnover of over $91bn. The Indian diaspora in the UK now numbers more than 1.8 million people, underlining the social and economic links between the two countries.
Business groups have welcomed the agreement as a catalyst for growth and an important signal that the UK remains committed to open trade.
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